Datalink: Fiscal 2Q10 Financial Results

Datalink reported results for its second quarter and six months that ended June 30, 2010.

Datalink’s results for the second quarter and the first six months of 2010 include three and six months of Incentra, LLC results of operations, respectively, following the acquisition which closed on December 17, 2009.

Revenues for the quarter ended June 30, 2009, increased 62% to $70.9 million compared to $43.7 million for the prior-year period, and increased 13% from first quarter 2010 revenues of $62.5 million. Revenues for the six month period ended June 30, 2010 increased 60% to $133.4 million compared to $83.6 million for the six months ended June 30, 2009.

GAAP Results
On a GAAP basis, the company reported net earnings of $5,000 or $0.00 per basic and diluted share for the second quarter ended June 30, 2010. This compares to net earnings of $283,000 or $0.02 per basic and diluted share in the second quarter of 2009. For the six months ended June 30, 2010, the company reported a net loss of $886,000, or $0.07 per basic and diluted share, compared to a net loss of $313,000, or $0.03 per basic and diluted share, in the first six months of 2009.

Non-GAAP Results
Non-GAAP net earnings for the second quarter of 2010 were $748,000, or $0.06 per basic and diluted share, compared to non-GAAP net earnings of $595,000, or $0.05 per basic and diluted share, in the second quarter of 2009. For the six months ended June 30, 2010, the company reported non-GAAP net earnings of $850,000, or $0.07 per basic and diluted share, compared to net earnings of $362,000, or $0.03 per basic and diluted share, in the first six months of 2009. A detailed reconciliation between GAAP and non-GAAP information is contained in the tables included herein.

Paul Lidsky, Datalink’s president and CEO, commented: "As we stated in our July 8, 2010 release our revenues came in at the upper end of our second quarter guidance. Our continued growth is the result of a steadily increasing trend in technology spending coupled with the success we are seeing from the investments we made to expand Datalink’s market share around data center solutions. Our strong revenue growth in the second quarter was partially fuelled by our previous acquisitions as well as strong organic growth coupled with expanded solutions-selling from our enhanced products and services portfolio."

"Product revenues increased 92 percent from the second quarter of 2009 and service revenues were up 29 percent for the same period. Backlog going in to our third quarter increased $1 million to $44.4 million. Order activity continued to grow in the second quarter and we again doubled the number of transactions over $500,000 within the quarter compared to the second quarter of 2009. Our customers and prospects are responding to our comprehensive capabilities and expanded portfolio as evidenced by our increased revenue, gross margin and expanding backlog."

"I am also pleased to report that as a result of our continued focus on training around advanced server, network and storage solutions and our customers’ need for a more integrated data center solutions approach, the former Incentra organization has steadily increased its storage portfolio sales over the first half of 2010 while the legacy Datalink teams are driving incremental server and networking solutions. Our collective accomplishments during the first half of 2010 are evidence that Datalink continues to strengthen its ability to deliver data center solutions that provide greater returns to our customers and simplify their vendor management process," said Lidsky.

Outlook
The company ended the second quarter of 2010 with a backlog of $44.4 million, which is up approximately $1 million from backlog at the end of the first quarter of 2010. Based on this backlog combined with a historical slowdown in buying activity and implementation time frames during the third quarter, as projects get delayed due to vacations and other data center availability issues during the summer months, we expect revenues to be between $68 million and $72 million for the third quarter of 2010. The company expects third quarter 2010 results to be between a net loss $0.01 and net earnings of $0.03 per diluted share on a GAAP basis, and net earnings of between $0.05 and $0.09 per diluted share on a non-GAAP basis. This compares to revenues of $42.7 million with a GAAP net loss of $0.01 per diluted share and non-GAAP earnings of $0.01 per diluted share in the third quarter of 2009.

Non-GAAP earnings per share exclude the effect of acquisition accounting adjustments from the Incentra acquisition to deferred revenue and costs, integration and transaction costs related to the acquisition, stock-based compensation expense, amortization of intangible assets, and the related effects on income taxes. The company estimates this total effect will be approximately $.06 per diluted share for the third quarter of 2010.